The guidance below was developed by the Financial Reporting StandardsCommittee (FRSC) of the Hong Kong Institute of Certified Public Accountants(HKICPA) and is for general reference only. The HKICPA, FRSC and the HKICPAstaff do not accept any responsibility or liability, and disclaim all responsibility andliability in respect of the guidance and any consequences that may arise from anyperson acting or refraining from action as a result of any materials in the guidance.Members of the HKICPA and other users of this guidance should also read the fullHKFRS Accounting Standards, as found in the HKICPA Members’ Handbook forfurther reference, and seek professional advice where necessary when applyingthe references contained in this guidance.The HKICPA’s Standard Setting Department welcomes your comments andfeedback on this guidance, which should be sent tocommentletters@hkicpa.org.hk.Accounting implications of the government subsidy scheme forthe abolition of the MPF offsetting arrangementIn June 2022, the Government of the HKSAR (HKSARG) gazetted the Employment andRetirement Schemes Legislation (Offsetting Arrangement) (Amendment) Ordinance 2022to abolish the Mandatory Provident Fund (MPF)-Long Service Payment (LSP) andSeverance Payment (SP) offsetting mechanism (the Abolition).In April 2023, the Chief Executive of the HKSAR announced that the Abolition will officiallytake effect on 1 May 2025 (the Transition Date). At the same time, the HKSARG hasindicated that it would launch a scheme to subsidise the post-transition portion of LSP/SPpayable by employers.On 22 November 2024, the Finance Committee of the Legislative Council approved thecreation of a commitment for implementing the subsidy scheme for the Abolition (LSPSubsidy) 1.This publication provides guidance on the accounting implications of the LSP Subsidy. It isan extension of the Educational guidance on the accounting implications of the abolition ofthe MPF-LSP offsetting mechanism in Hong Kong published by the HKICPA in July 2023(July 2023 Guidance) and should be read therewith.1)
Main features of the LSP SubsidyThe HKSARG will subsidise a portion of the post-transition LSP payable by an employer upto a certain amount per employee per year for a period of 25 years after the Transition Date.In terms of the LSP Subsidy, an employer’s share of the post-transition LSP is calculatedas follows:
•For the first $500,000 of all LSP paid by an employer in a year, the employer’sshare of post-transition LSP per employee is the lower of:
(a)
the amount of post-transition LSP for that employee multiplied by a specifiedsharing ratio (e.g. 50% in the first year after the Abolition takes effect); and1 The subsidy scheme covers SP as well; however, as explained in footnote 4 to the July 2023Guidance, this series of guidance focuses on the accounting for LSP; for simplicity, the rest of thedocument refers to LSP only.(b)
a specified capped amount (e.g. $3,000 in the first year after the Abolitiontakes effect)2.•Beyond the first $500,000 of all LSP paid by an employer in a year, the employer’sshare of post-transition LSP per employee is the amount of post-transition LSP forthat employee multiplied by a specified sharing ratio.The specified employer’s sharing ratio and the capped amount are progressively increasedover the 25-year subsidy period. See Appendix for the full LSP Subsidy table.2)
Accounting for the LSP SubsidyAs the HKSARG’s commitment for the LSP Subsidy was approved by the relevantauthorities in November 2024, a question may arise as to the timing of recognition and themeasurement of the LSP Subsidy. Considering the features of the LSP Subsidy and itsinteraction with the LSP obligation, which is accounted for as a defined benefit schemeunder HKAS 19 Employee Benefits, there is no specific guidance in HKFRS AccountingStandards on whether such an interaction should be reflected in accounting, and if so, howto account for it. While there may be other acceptable accounting alternatives, the FRSCconsiders that a generally acceptable method is to account for it as a government grant inaccordance with HKAS 20 Accounting for Government Grants and Disclosure ofGovernment Assistance which is explained below.Accounting for the LSP Subsidy as a government grantThe LSP Subsidy meets the definition of a government grant in accordance with HKAS 20.3as it is ‘assistance by [the HKSAR] government in the form of transfers of resources to anentity in return for past or future compliance with certain conditions relating to the operatingactivities of the entity…’. The recognition of government grant is governed by paragraphs 7and 20 of HKAS 20:
‘7Government grants, including non-monetary grants at fair value, shall not berecognised until there is reasonable assurance that:
(a)
the entity will comply with the conditions attaching to them; and(b)
the grants will be received.’‘20 A government grant that becomes receivable as compensation for expenses orlosses already incurred or for the purpose of giving immediate financial supportto the entity with no future related costs shall be recognised in profit or loss of theperiod in which it becomes receivable.’According to the Labour Department’s website on the abolition of MPF offsettingarrangement, ‘the [HKSARG] will disburse the subsidy to employers on a reimbursementbasis. Employers should pay [LSP] to employees in accordance with the provisions underthe Employment Ordinance and then submit applications for disbursement of [the LSPSubsidy]. Employers should prepare all supporting documents required when submittingtheir applications to facilitate approval of applications and disbursement of subsidies as soonas possible.’The ‘reasonable assurance’ recognition threshold in HKAS 20 is higher than that for therecognition of a liability for a defined benefit obligation in HKAS 19. In respect of recognitionof LSP Subsidy under HKAS 20, given the approval of the commitment of the subsidy bythe relevant authorities in November 2024, the uncertainties generally lie with the criterionin paragraph 7(a). In particular, given the long-tail nature of the LSP liability, an entity’s2 No cap from the 10th year after the Abolition takes effect.ultimate entitlement of the related LSP Subsidy would depend on a number of factors someof which are not entirely within the control of the entity, and the associated uncertaintiescould take a long time to resolve – for example, notwithstanding a long service period, anemployee under continuous employment would forfeit his LSP entitlement if he voluntarilyresigns before the age of 65 on grounds other than ill health.In view of the above, it is expected that under most circumstances there would not bereasonable assurance that the conditions associated with the LSP Subsidy would be metuntil an employer has paid or is about to pay the LSP to their employees in accordance withthe Employment Ordinance. From that point there would be reasonable assurance that theLSP Subsidy would become receivable, as the subsequent application, vetting andverification process is considered perfunctory as long as the employer has complied withrelevant laws and regulations. Accordingly, consistent with the guidance in paragraph 20 ofHKAS 20, the recognition criteria for the LSP Subsidy receivable under paragraph 7(a) ofHKAS 20 is generally met when the employer has paid or is about to pay the LSP to theemployee and is eligible to claim the related LSP Subsidy from the HKSARG.In light of the above, assuming that an entity is eligible for and will apply for the LSP Subsidy,under most circumstances that subsidy is recognised as a receivable when the employerhas paid or is about to pay the LSP to the employee; further, as that receivable is acompensation for LSP expense already incurred by the employer, the amount is recognisedin profit or loss of the period in which it becomes receivable.Under limited and specific circumstances, it may be possible that the reasonable assurancethreshold is met earlier than the payment of the LSP by the employer, for example, if theconcerned employee is approaching retirement age, his employment would be terminatedonce he reaches that age and there is reasonable assurance that the employer will settlethe LSP when due (e.g. the company has set aside separate funds for the obligation andthere is reasonable assurance that such funds will be used for this purpose). Such casesshould be assessed individually with care in terms of the exercise of judgment regarding thereasonable assurance threshold based on their respective facts and circumstances.Entities applying SME-FRS and HKFRS for Private EntitiesThe accounting treatment above is also applicable to entities applying SME-FRS as thecriteria for recognising government grants in accordance with section 12.1 of SME-FRS arethe same as those in HKAS 20.For entities applying HKFRS for Private Entities, section 24.4(b) thereof requires an entityto recognise in income ‘a grant that imposes specified future performance conditions on therecipient […] only when the performance conditions are met’. The performance condition inthis context is payment of the LSP by the employer to the employee. As such, the relatedLSP Subsidy is recognised as a receivable with a corresponding income in profit or losswhen the employer has paid the LSP to the employee.January 2025AppendixEmployer’s Share of Post-abolition Severance Payment/Long Service Payment(SP/LSP) under the Subsidy Scheme for Abolition of MPF Offsetting Arrangement3Yearafter theabolitionEmployer’s share per employee(as % of post-transition portion of SP/LSP payable)
First $500,000 of all SP/LSPpaid by an employer in a yearBeyond the first $500,000 ofall SP/LSP paid by anemployer in a year1 - 350%, capped at $3,00050%55%, capped at $25,00055%60%, capped at $25,00060%65%, capped at $25,00065%70%, capped at $50,00070%75%, capped at $50,00075%80%, capped at $50,00080%80%85%80%90%85%95%85%100%14 - 1990%100%20 - 2595%100%3 Extracted from Legislative Council Finance Committee paper FCR(2024-25)37 discussed on 22November 2024.
Educational guidance: Accounting implications of the government subsidy scheme for the abolition of the MPF-LSP offsetting arrangement
下载原件The guidance below was developed by the Financial Reporting StandardsCommittee (FRSC) of the Hong Kong Institute of Certified Public Accountants(HKICPA) and is for general reference only. The HKICPA, FRSC and the HKICPAstaff do not accept any responsibility or liability, and disclaim all responsibility andliability in respect of the guidance and any consequences that may arise from anyperson acting or refraining from action as a result of any materials in the guidance.Members of the HKICPA and other users of this guidance should also read the fullHKFRS Accounting Standards, as found in the HKICPA Members’ Handbook forfurther reference, and seek professional advice where necessary when applyingthe references contained in this guidance.The HKICPA’s Standard Setting Department welcomes your comments andfeedback on this guidance, which should be sent tocommentletters@hkicpa.org.hk.Accounting implications of the government subsidy scheme forthe abolition of the MPF offsetting arrangementIn June 2022, the Government of the HKSAR (HKSARG) gazetted the Employment andRetirement Schemes Legislation (Offsetting Arrangement) (Amendment) Ordinance 2022to abolish the Mandatory Provident Fund (MPF)-Long Service Payment (LSP) andSeverance Payment (SP) offsetting mechanism (the Abolition).In April 2023, the Chief Executive of the HKSAR announced that the Abolition will officiallytake effect on 1 May 2025 (the Transition Date). At the same time, the HKSARG hasindicated that it would launch a scheme to subsidise the post-transition portion of LSP/SPpayable by employers.On 22 November 2024, the Finance Committee of the Legislative Council approved thecreation of a commitment for implementing the subsidy scheme for the Abolition (LSPSubsidy) 1.This publication provides guidance on the accounting implications of the LSP Subsidy. It isan extension of the Educational guidance on the accounting implications of the abolition ofthe MPF-LSP offsetting mechanism in Hong Kong published by the HKICPA in July 2023(July 2023 Guidance) and should be read therewith.1)
Main features of the LSP SubsidyThe HKSARG will subsidise a portion of the post-transition LSP payable by an employer upto a certain amount per employee per year for a period of 25 years after the Transition Date.In terms of the LSP Subsidy, an employer’s share of the post-transition LSP is calculatedas follows:
•For the first $500,000 of all LSP paid by an employer in a year, the employer’sshare of post-transition LSP per employee is the lower of:
(a)
the amount of post-transition LSP for that employee multiplied by a specifiedsharing ratio (e.g. 50% in the first year after the Abolition takes effect); and1 The subsidy scheme covers SP as well; however, as explained in footnote 4 to the July 2023Guidance, this series of guidance focuses on the accounting for LSP; for simplicity, the rest of thedocument refers to LSP only.(b)
a specified capped amount (e.g. $3,000 in the first year after the Abolitiontakes effect)2.•Beyond the first $500,000 of all LSP paid by an employer in a year, the employer’sshare of post-transition LSP per employee is the amount of post-transition LSP forthat employee multiplied by a specified sharing ratio.The specified employer’s sharing ratio and the capped amount are progressively increasedover the 25-year subsidy period. See Appendix for the full LSP Subsidy table.2)
Accounting for the LSP SubsidyAs the HKSARG’s commitment for the LSP Subsidy was approved by the relevantauthorities in November 2024, a question may arise as to the timing of recognition and themeasurement of the LSP Subsidy. Considering the features of the LSP Subsidy and itsinteraction with the LSP obligation, which is accounted for as a defined benefit schemeunder HKAS 19 Employee Benefits, there is no specific guidance in HKFRS AccountingStandards on whether such an interaction should be reflected in accounting, and if so, howto account for it. While there may be other acceptable accounting alternatives, the FRSCconsiders that a generally acceptable method is to account for it as a government grant inaccordance with HKAS 20 Accounting for Government Grants and Disclosure ofGovernment Assistance which is explained below.Accounting for the LSP Subsidy as a government grantThe LSP Subsidy meets the definition of a government grant in accordance with HKAS 20.3as it is ‘assistance by [the HKSAR] government in the form of transfers of resources to anentity in return for past or future compliance with certain conditions relating to the operatingactivities of the entity…’. The recognition of government grant is governed by paragraphs 7and 20 of HKAS 20:
‘7Government grants, including non-monetary grants at fair value, shall not berecognised until there is reasonable assurance that:
(a)
the entity will comply with the conditions attaching to them; and(b)
the grants will be received.’‘20 A government grant that becomes receivable as compensation for expenses orlosses already incurred or for the purpose of giving immediate financial supportto the entity with no future related costs shall be recognised in profit or loss of theperiod in which it becomes receivable.’According to the Labour Department’s website on the abolition of MPF offsettingarrangement, ‘the [HKSARG] will disburse the subsidy to employers on a reimbursementbasis. Employers should pay [LSP] to employees in accordance with the provisions underthe Employment Ordinance and then submit applications for disbursement of [the LSPSubsidy]. Employers should prepare all supporting documents required when submittingtheir applications to facilitate approval of applications and disbursement of subsidies as soonas possible.’The ‘reasonable assurance’ recognition threshold in HKAS 20 is higher than that for therecognition of a liability for a defined benefit obligation in HKAS 19. In respect of recognitionof LSP Subsidy under HKAS 20, given the approval of the commitment of the subsidy bythe relevant authorities in November 2024, the uncertainties generally lie with the criterionin paragraph 7(a). In particular, given the long-tail nature of the LSP liability, an entity’s2 No cap from the 10th year after the Abolition takes effect.ultimate entitlement of the related LSP Subsidy would depend on a number of factors someof which are not entirely within the control of the entity, and the associated uncertaintiescould take a long time to resolve – for example, notwithstanding a long service period, anemployee under continuous employment would forfeit his LSP entitlement if he voluntarilyresigns before the age of 65 on grounds other than ill health.In view of the above, it is expected that under most circumstances there would not bereasonable assurance that the conditions associated with the LSP Subsidy would be metuntil an employer has paid or is about to pay the LSP to their employees in accordance withthe Employment Ordinance. From that point there would be reasonable assurance that theLSP Subsidy would become receivable, as the subsequent application, vetting andverification process is considered perfunctory as long as the employer has complied withrelevant laws and regulations. Accordingly, consistent with the guidance in paragraph 20 ofHKAS 20, the recognition criteria for the LSP Subsidy receivable under paragraph 7(a) ofHKAS 20 is generally met when the employer has paid or is about to pay the LSP to theemployee and is eligible to claim the related LSP Subsidy from the HKSARG.In light of the above, assuming that an entity is eligible for and will apply for the LSP Subsidy,under most circumstances that subsidy is recognised as a receivable when the employerhas paid or is about to pay the LSP to the employee; further, as that receivable is acompensation for LSP expense already incurred by the employer, the amount is recognisedin profit or loss of the period in which it becomes receivable.Under limited and specific circumstances, it may be possible that the reasonable assurancethreshold is met earlier than the payment of the LSP by the employer, for example, if theconcerned employee is approaching retirement age, his employment would be terminatedonce he reaches that age and there is reasonable assurance that the employer will settlethe LSP when due (e.g. the company has set aside separate funds for the obligation andthere is reasonable assurance that such funds will be used for this purpose). Such casesshould be assessed individually with care in terms of the exercise of judgment regarding thereasonable assurance threshold based on their respective facts and circumstances.Entities applying SME-FRS and HKFRS for Private EntitiesThe accounting treatment above is also applicable to entities applying SME-FRS as thecriteria for recognising government grants in accordance with section 12.1 of SME-FRS arethe same as those in HKAS 20.For entities applying HKFRS for Private Entities, section 24.4(b) thereof requires an entityto recognise in income ‘a grant that imposes specified future performance conditions on therecipient […] only when the performance conditions are met’. The performance condition inthis context is payment of the LSP by the employer to the employee. As such, the relatedLSP Subsidy is recognised as a receivable with a corresponding income in profit or losswhen the employer has paid the LSP to the employee.January 2025AppendixEmployer’s Share of Post-abolition Severance Payment/Long Service Payment(SP/LSP) under the Subsidy Scheme for Abolition of MPF Offsetting Arrangement3Yearafter theabolitionEmployer’s share per employee(as % of post-transition portion of SP/LSP payable)
First $500,000 of all SP/LSPpaid by an employer in a yearBeyond the first $500,000 ofall SP/LSP paid by anemployer in a year1 - 350%, capped at $3,00050%55%, capped at $25,00055%60%, capped at $25,00060%65%, capped at $25,00065%70%, capped at $50,00070%75%, capped at $50,00075%80%, capped at $50,00080%80%85%80%90%85%95%85%100%14 - 1990%100%20 - 2595%100%3 Extracted from Legislative Council Finance Committee paper FCR(2024-25)37 discussed on 22November 2024.